Brief Analysis of Indian Aviation - Airliners-India

tayara mechanici · Member

Brief Analysis of Indian Aviation

tayara mechanici · Member

There are plenty of contradictions within the 2 BCG reports. By grouping the 2 countries together they have tried to market a large section of their projected airline customers but in doing so they have exhibited the weaknesses of their forecasting and analysis.

They don't take into consideration the high number of NRIs around the world estimated at 20million may be more (Chinese expats are mainly in US & SE). A large % of these people live in N.America, Europe and Africa, with a huge numbers increasing in ANZ. Out of this lot the first set of migrants who went in the late 60s early 70s boom in the west are all retired and are increasingly travelling to India with a second home here. This retired lot are mainly high earning professionals.

Secondly the growth in leisure travel to India is increasing with awareness of the Indias economic story; earlier they only discussed satyajit ray & mother teresa here in western press. The businesses that are propelling the boom in INDIA are diff from china, In Indias case it is more of Services industry owned and operated by Indians. China it is manf mainly owned by the MNC or Taiwanese. Service industry involves greater level of travel as compared to manf, Its claimed that a full 'F' or 'J' class pays for rest of the aircraft. Yes security is a threat, so is it in London and NYC but awareness of India is growing fast propelling leisure.

The constraints for long haul in India is mainly due Infrastructure and the protectionism towards AI /IA. GOI can handle only 3 WB at a time. Hyd, Blr, Maa are growing higher than the national avg this is mainly because of the long haul. Ahmedabad can easily feed a daily to LTN serving Leicester and Wembley (nani gujarat) which are within 90min of this airport.

The greatest recognistion of the potential for long haul out of India is the revenue contribution of india to the fortunes of BA, LH, SQ, & EK.

I haven't read all of the report but the theory of Long haul travel linked to per capita is trashed by the proven theory that 70% of the trips are made by 20% of the travellers. 20% of India population will reach a per capita (PPP) of $15000 well before 2035 even if one accepted the per capita arguement.

-- Edited by tayara mechanici at 11:42, 2006-07-29

Aseem · Member

it is inevitable that LCC will take the larger piece of cake. There are two ways to stimulate the growth and relieve pressure off full-service carriers.

Allow full service carriers to fly international ASAP.
Allow LCCs to grow into S.E.Asia and Gulf market. Greater opportunities for LCC will make them less hungry for full-serivce carrier's market, and also counter LCC from neighbouring countries

in short!! increase the field so that everyone can play without too much biting into each other's territory.

rgds

VT-ASJ

vivekman · Member

Also, going ahead the line between a full-service carrier and an LCC will become more blurry, with more carriers opting to place themselves "between" both segments. This means that they would offer lower fares while offerring some inflight services. At the same time, carriers like 9W and IC would continue to offer lower fares to fight competition from LCCs. This only means good news for passengers as more people would want to fly as the fares would be competitive throughout all segments.

This phenomenon would put an end or atleast cut down to a very small minority - the elite traveller used to the luxuries & frills offered by a full-service carrier. If he can save around thousand bucks (even more in some cases) on an air ticket, I am sure he wouldn't mind sacrificing a few comforts. With low-cost travel spreading far and wide, flying an LCC is no longer a taboo even for the business traveller!

Rightly said, the government should now consider opening up the international market to all players so that they do not eat up each other. There is plenty of room out there for everyone!

tayara mechanici · Member

vivekman wrote:

Also, going ahead the line between a full-service carrier and an LCC will become more blurry,the elite traveller used to the luxuries & frills offered by a full-service carrier. If he can save around thousand bucks (even more in some cases) on an air ticket, I am sure he wouldn't mind sacrificing a few comforts. With low-cost travel spreading far and wide, flying an LCC is no longer a taboo even for the business traveller!

Infact when B787 was released as a concept one of the airlines interested then was Ryan Air, EU largest and most profitable airline, a LCC. They were looking at using the LCC model for flts beyond 3hrs i.e. Atlantic. This is long haul, and if you had to adopt this concept between India and EU it will generate a whole load of new travellers, and, since India lies equi-dist between EU and Aust a possible open skies between the 3 EU-INDIA-AUS will spin a massive market for travel not seen since the EU-US open skies policy. On your point of business travelling LCC, Easyjet has cornered a large section of the internal EU business travel.

There are a few issues operating long haul LCC one of which is the inability to operate multiple sectors per day, however with systems reliability and better sfc by the NG engines, this will compensate for any such losses.

Talking of Open-Skies IMO India should sign OS only with countries that offer substantial pax lift. I see no point in an OS with srilanka, sin, dxb etc the airlines from these countries bleed India dry without offering similar advantage. I am totally against the idea of complete OS some of the Tree huging activist propose.

tayara mechanici · Member

On the topic of Open skies agrrement with countries with small air traveller population, the aviation community in INDIA has to closely follow the happenings in Bangladesh and Pakistan. The national carriers in both of these countries are on the verge of bankruptcy in case of Biman it is almost imminent. This situation offers an oppurtunity for some of the ME airlines to repeat EKs takeover of Airlanka and the subsequent OS with India.

Airlanka flies 84 weekly flts to India and is managed by EK. A repeat of this with Biman or PIA will sound the death knell for international ops by Airlines in India.

Well the above scenario in a hightened Indian aviation enviournment is remote but not IMPOSSIBLE.

tayara mechanici · Member

MORE DOOM AND GLOOM

http://www.financialexpress.com/fe_full_story.php?content_id=136297

A rough ride for aviation

If anyone needed proof on the boom in India’s aviation industry, a trip to the new departure lounge at Mumbai airport is all it will take to get convinced. It’s 3 pm - the leanest hour of the day - on a muggy Monday yet there’s isn’t a single unoccupied seat in the lounge. Passengers are sitting on the stairs, shrieking children run past winding queues, aircraft crew skirt a crowded kiosk serving snacks and harried ground staff check the boarding passes of commuters heading out to the first flight of the afternoon.

India’s aviation sector is booming and the eight airlines whose planes dot the country’s skies should be happy at the roaring demand, right? Wrong. Yields —defined revenues per passenger ticket —of full service carriers are declining sharply and as seat capacity expands by two-fifths, even low cost airlines are finding it difficult to bring their bottomlines into the black. And with New Delhi-based Indigo Airlines starting services later this month and the launch of Jagson Airlines, Magic Air and East-West Airlines expected before the year-end, the situation can only get worse.

I don't understand how did 9W walk into that disastorous alliance with S2, in Flying terminology i would describe it as ''controlled flight into terrain'' !!! All of these airlines need to kee their eye on the ball

JumboJet · Member

To people it was a merger, but i think 9W was clear that it wanted the a/cs and parking rights of S2 more than anything else.....

tayara mechanici · Member

JumboJet wrote:

To people it was a merger, but i think 9W was clear that it wanted the a/cs and parking rights of S2 more than anything else.....

Thanks for correcting, merger or in the hope of merger, you right they were interested in slots and aircrafts but the burden they were ready to accept ! Even to a amateur, a back of the envelope calculation suggests that S2 was grossely overvalued, there had been doubts on capacity constraints in India but the govt had a clear vision of relieving it, and they have proved it, there is a thread on the recent developments in DEL and BOM where reports of the rapid exit ways are helping increase a/c movement. Additionally the natural death of S2 would have added its slots to the available pool. IMO only the oil rich sheikhs of gulf can afford to buy S2 in its present state and afford to turn it around.

NG was very confident of his manipulative skills, all he ended up doing was dent his own image as a sound airline manager.

tayara mechanici · Member

Same Same

http://www.business-standard.com/compindustry/storypage.php?leftnm=1&subLeft=1&chklogin=N&autono=100927&tab=r

Ailing airlines bank on rising local traffic P R Sanjai / Mumbai August 09, 2006

Riding high on the growth in domestic traffic, loss-riden start-up airlines are confident to be back in the black in two years. Analysts said domestic passenger traffic last year grew by 25 per cent to 25 million passengers. “This growth rate will continue in the next four years and will increase the number of travellers to 60 million,” they added. While the Wadia group-promoted GoAir claims that it will make profit by end of the financial year 2006-07 , SpiceJet, Kingfisher Airlines and Air Deccan are also expected to be in black in 2007-08. “However, short-term outlook for the aviation industry remains bleak with the spiralling fuel and personnel costs,” the analysts pointed out. Meanwhile, full service airline Jet Airways, which commenced operations in 1993, has reported a net loss of Rs 44.98 crore for the first quarter of fiscal 2007 despite 24.78 per cent growth in total income from operations at Rs 1,678.76 crore.

Airline industry sources point out that the expected profits by the next one year will be mainly volume coupled with increase in price. Consolidation of infrastructure, market share, yield management and realistic price will be the key to turnaround of these airlines.

As a part of the application for AOC, start-up airlines in U.K. are expected to submit a cashflow forecast, part of the profit & loss statement for 3 yrs. In this the airline has to show a loss for 2yrs i.e. potential to sustain operations and breakeven only in the 3rd yr of ops. From historical data CAA is aware of the large cash flow requirements of a start-up airline and doesn't buy a very positive cash flow forecast, infact Ryan Air the biggest and most profitable airline in EU was consistently reporting losses for over 5yrs of its initial existence, it was only after the management take over by O'Leary that it has been posting record profits.

Liberalisation in domestic aviation here in India started only in 2003 with DN, for all practical purposes. Unlike the airlines in the west one has to appreciate Indian aviation has posted a phenomenal growth of close to 20% YOY for the last 3yrs, and, inspite of the infra constraints and record fuel prices the growth is being sustained. There are more tricks in the Indian aviation bag to keep this growth maintained. An opening of the gulf sector will change the history of aviation in the whole world. Airlines in the gulf are hugely dependent on India to feed their base traffic as well as manpower.Wage increases in India has resulted in EY & EK trying to bleed each other and their regional airlines dry of core staff i.e. Pilots and Engineers. With multiple airlines from India flying into these countries will hit their feed traffic.

Having said that airlines in India have to think out side the box and come up with some unique business models, blowing million of $ trying to secure slots and sustain ops in LHR while chasing VFR pax makes no sense. 9W operating ATQ-LHR is absurd, the same pax will be happy to fly LTN or STN for a few pounds less. The ops in LTN or STN can be spread out with flts to Ahmedabad/ Baroda/HYD/Chennai cities with substantial middle-class travellers. Airlines in India have way to go before they can dent BA or VS F/J class pax no point going head to head with them there. On the training of Pilots and Engineers, a common pool with resources of IA /AI would have made sense rather than duplicating it with each airline setting up its own MRO and Flying school, its absolutely crazy blowing scarce resources duplicating the same thing. AI/IA would have been happy to outsource these divisions with hope of additional revenue, employees also would have been happy at extra income based o productivity. Probably all of this was explored ...........as long as they can stay aloft.

-- Edited by tayara mechanici at 15:27, 2006-08-09

-- Edited by tayara mechanici at 19:36, 2006-08-09